Study could stabilize wind rates

By Steve Estes

Almost never has there been a group of dedicated volunteers more intent on making themselves irrelevant than the insurance watchdogs Fair Insurance Rates for Monroe.

FIRM has been fighting what it calls inequitable and unfair windstorm insurance policies for more than eight years, pushing back against windstorm rate hikes by Citizens Insurance, a state-run insurer of last resort, which is also the only insurer that can be used by Keys property owners, that at times approached 200 percent yearly.

And the group has thus far been fairly successful.

And now, says County Commissioner and FIRM co-founder Heather Carruthers, the group may at last be on the final push toward irrelevancy.

FIRM got approval from the Citizens board earlier this year to fund a three-pronged study, at a cost of $485,000, to quantify proper windstorm rates for Monroe County.

Until recently, Monroe County was charged a yearly average windstorm fee higher than any other county in the state, despite being the county with the lowest amount in claims following any storm.

The reasons for that were many, says Carruthers.

But those are all reasons FIRM hopes will be invalid once the study is complete.

FIRM officials say that the windstorm rates charged Monroe County property owners have never taken into account the island chain’s stringent building codes, the most stringent in the hurricane-prone state, nor have the rates ever taken into account the actual threat from storm surge versus wind damage.

Because of the stringent building codes here, say Carruthers, Monroe County property owners turn in minimal damage claims following. In fact, the payout to Monroe County against the premiums collected by Citizens over an eight-year span that included the multiple hurricane seasons of 2004 and 2005 resulted in a profit for the state-run insurer of more than $500 million.

“Monroe has been a donor county, giving Citizens surplus money to use in other counties where the claims were significantly higher,” said Carruthers.

FIRM will manage the study while Citizens is putting up the funding.

The first phase of the study will be an analysis of Keys’ buildings vulnerability to wind damage.

“We build stronger than anyone in the state and we want Citizens to recognize that,” said Carruthers.

The second phase will be a historical analysis and projections of storm surge damage in the Keys.

Carruthers says that the lack of windstorm claims should support lower rates over the long haul for Keys’ properties.

The final phase will be to integrate the data into a risk model that accurately reflects the potential for damage from wind in the Keys.

“Once that is done, I believe Citizens will have to set an actuarially sound rate that lowers windstorm for everyone here,” said Carruthers.

The study could result in several different outcomes, she says.

First, the study could support the current rates charged by Citizens, though FIRM officials believe that is a highly unlikely result.

The study could correctly identify Monroe County as a lower-risk area than many other coastal communities in Florida that would entice a private insurer to move in here and offer rates competitive to or lower than what Citizens offers.

Lastly, the study could lead to the establishment of a Monroe County insurance pool funded by and for the benefit of property owners here in a self-insured company.

Carruthers said the group has already received inquiries of interest in potentially acting as a windstorm carrier, or as a re-insurance partner, from private companies that have looked at the initial data.

The money being put up by Citizens doesn’t come without some strings attached, however.

The funding is a loan and as such would have to be paid back to Citizens at some time.

“If we form our own insurance pool in Monroe County, the mutual company would pay back the loan from policy premiums. If a private insurer agrees to take the risk here, they would pick up the payback,” she said.

Carruthers was a little more noncommittal on what happens if the study bears out Citizens’ current premiums.

FIRM officials said they have been in near constant negotiations with the Citizens board and hope to have a request for proposals to conduct the study on the streets in days, with replies in just over a month.

By November, says Carruthers, the study results should be final and decisions on where to go from there can begin.

FIRM was instrumental in getting the state Legislature to cap yearly windstorm increases at 10 percent during last year’s Tallahassee sessions, and has been instrumental in putting a stop to other increases that resulted in rates 233 percent above what had been the norm.

FIRM was formed in 2006 to fight a proposed 20 percent rate hike to Monroe County, at which the group was successful.